Was Labor's childcare fund only ever about the union?

A $300 million fund to subsidise childcare workers' wages set up by the former Labor government has been criticised by the new Coalition Government as a front to boost union membership. The Coalition wants the money reallocated to professional development.

When the Assistant Minister for Education, Sussan Ley, tabled an official review of the Early Years Quality Fund in Parliament on December 10, she said the fund had been used as an opportunity for workers "to be tricked" into joining a union.

"This was never about the early years, this was never about quality, this was never about educators, this was never about the children, this was only ever about the union," Ms Ley said.

The claim: Sussan Ley says Labor's $300 million fund to subsidise childcare workers' wages was only ever about the unions.

The verdict: Ms Ley's claim is in the ballpark. The fund distribution process favoured the union.

The push for higher wages

United Voice, a union representing services industry workers, has been lobbying for federal government wage subsidies for child care for three years. The national president, Michael Crosby, told ABC Fact Check the union spent over $23 million on its "Big Steps" campaign for pay rises across the entire early childhood education and care sector.

The average childcare worker is paid only slightly more than the minimum wage.

The idea behind wage subsidies was to increase workers' pay without pushing up the cost of child care to working families, Mr Crosby says. The union wanted a pay rise of $10 an hour for Certificate 3 workers, the lowest qualified, with proportional increases for higher classifications at an estimated cost to the federal government of $1.4 billion a year.

It had to settle with significantly less when the then early childhood minister Peter Garrett and his junior minister with responsibility for child care Kate Ellis launched the Early Years Quality Fund on March 19.

The fund would provide $300 million in grants to long day care centres, Ms Ellis said. Long day care is the biggest part of the early childhood sector, employing nearly 80,000 people and accounting for about half the workforce.

The fund allowed for an increase in wages of $3 an hour for the lowest qualified workers, and proportional increases for all staff, not the $10 increase the union wanted. It was intended to support the National Quality Framework, introduced by Labor in 2012, which requires early childhood education services to employ staff with better educational qualifications by 2014.

The money was allocated for only two years. At the same time Labor established a pay equity unit in the Fair Work Commission, to have an initial focus on the early childhood education and care sector.

A parliamentary committee that reviewed the legislation setting up the fund in June acknowledged submissions criticising the short life span and the prospect of wage increases lapsing after two years. Its report said the new unit at the commission was "a forum where these concerns can be pursued at a future date".

Was $300 million ever enough?

It is clear that $300 million was never going to subsidise more than 30 per cent of the long day care centres it targetted, or 15 per cent of the whole sector.

The official review released by Ms Ley on December 10, written by accounting firm PricewaterhouseCoopers, says: "While the Early Years Quality Fund intended to provide support to the largest portion of the sector, the quantum of wage increases meant that even within the long day care sector approximately 70 per cent of long day care educators would not benefit."

The PwC report also says the choice to limit the fund to long day care ignores other parts of the sector - including preschools and after-school care - which were also under pressure to attract and retain staff.

The parliamentary committee received many submissions questioning the inequity of some workers receiving a pay rise and many missing out.

A submission by the Child Care Centres Association of Victoria said: "There is simply not enough money in the fund to provide the increases outlined by the government to all educators in the sector."

United Voice's submission to the committee said if the money had been spread evenly across the sector, the wage rise would have been so low it would have set "no new standard, no new benchmark". It said the government's "fundamental role is to kick start a serious move toward professional wages in the sector".

"With educators in 40 per cent of [long day care] centres being paid the first step towards a professional wage we will be able to see the difference that makes to staff retention and quality outcomes, the need for increases to be spread to the rest of the sector and the size of the budgetary allocation necessary for a future government to bring that about," the submission said.

On the day the fund was announced Ms Ley told ABC's PM program: "It's an overture to the union movement; it's far too little; it won't achieve what it is setting out to do, which is ease the financial pain of transition to the national quality framework, particularly the increased qualification requirements of the staff."

Enterprise agreements

For a centre to be eligible to receive a grant from the fund, it was required to have an enterprise agreement, or a commitment to negotiate one. Ms Ellis said on December 10 this was to ensure that centres passed on the federal subsidy to workers. Before the March announcement there were approximately 100 enterprise agreements in the sector. By the end of October, there were over 400.

The PwC report says there was evidence that the requirement to have an enterprise agreement was used by United Voice to increase its membership.

"The [Education] Department advises that it monitored all media streams relevant to the [fund] and that the Big Steps Facebook page made several statements that staff needed to join the union in order to be eligible for funding under the EYQF," the report said.

Mr Crosby told Fact Check the union's Facebook page was like a conversation, and it did not remove comments unless they "crossed the line".

A submission to the parliamentary committee from a small Brisbane community centre, the Munro Centre, said: "The union representative who came out insisted on speaking with every educator and telling them if they did not sign up on that day, they would cause our centre to miss out on the pay rise."

The Education Department's submission to the committee included a letter the department wrote to the union in April about inquiries it had received from childcare centres. The centres told the department a union representative "had advised them that access to grants under the fund will only be provided to services with a majority of employees who are members of United Voice," the letter said.

The department did not investigate the veracity of each of the claims but updated information on its website to say: "It is not a requirement for employees of a service to be members of a union in order for a service to be eligible to apply for funding under the Early Years Quality Fund." It also said it was not necessary for employees to be union members in order to negotiate an enterprise agreement.

The department told the union it was writing to all long day care centres providing a link to that information.

Samantha Page, the CEO of Early Childhood Australia, an industry organisation and a former member of the fund's advisory board, says the union ran a strong campaign and was able to secure money from the government where others had failed.

Ms Page told Fact Check she had concerns about the information United Voice was giving about the fund and raised them with the advisory board, the department and United Voice.

Distributing the grants

The guidelines for the fund were published on July 19 and applications opened four days later. According to the PwC report, the funding cap of $300 million was reached within 13 hours on July 23. The list of providers finalised for approval was completed three days later.

The largest operator, Goodstart Early Learning, filed an application in the first hour and was awarded $132 million, more than a third of the funding available.

"The policy was for applications to be processed in the order in which they were received by the department and were to be assessed until the $300 million funding cap was reached," the PwC report says.

"This 'first in-first served' approach placed pressure on the sector to submit their applications as soon as possible and rewarded providers that had the ability to dedicate resources to the application process from the point at which the guidelines were released."

Sixteen contracts were signed on September 6, the day before the election. The government sent a further 453 letters of offer for conditional funding between July 26 and August 2 but the organisations involved did not have contracts signed before the change of government.

A further 574 applications were received, of which 29 were assessed as non-compliant, leaving 545 compliant applicants who did not receive offers.

The program guidelines said advice would be provided to the sector as soon as possible when the funding cap had been reached.

But no statement was released and this "resulted in applications continuing to be received after 26 July 2013 when it was known that the cap had been reached," the PwC report said.

On December 10, Ms Ley said this delay was linked to the union. "Every second it was open there was more opportunity for union sign-ups," she said. "There was more opportunity for members to be tricked into joining the union."

Members of the advisory board defended the first-come-first-served policy, telling Fact Check it was clear a Coalition government would oppose the fund so there was an imperative to get the grants out and the contracts signed.

Ms Ellis said on December 10 the Coalition was given "every opportunity" during the pre-election caretaker period to raise concerns about the contracts before they were signed.

"The Assistant Minister was absolutely given the opportunity to comment on the biggest contract under this fund [with Goodstart] when she was contacted during caretaker to say 'if you have got any concerns about this contract being offered please let us know'," Ms Ellis said.

"We got absolutely no response and now she's ducking and weaving, breaking election commitments and betraying childcare workers across Australia," she said.

What happens next

Goodstart says its contract stipulates the first instalment was payable immediately on September 6. But a spokesperson from Ms Ley's office says when the Coalition took Government on September 7, the fund was frozen pending the official review. It was no longer frozen, he said.

Goodstart says it still has not received its first instalment of $60.5 million due on September 6. The total due that day under the 16 contracts was $62.5 million. The Government says it is asking Goodstart and 15 other organisations to "hand back the money", but it is really asking them not to accept the payment due under their contracts.

Future payments scheduled to over the next two years are unlikely to be paid. The 453 childcare centres that received "letters of offer" have had their offers taken off the table.

Ms Ley wants the full $300 million to be spent on professional development across the sector.

The verdict

The $300 million was earmarked for low-paid workers and linked to raising the quality of care they provide to children. However, there are reasonable criticisms of the amount allocated to the fund, the uneven way it was distributed and the adoption of a first-come-first-served policy. This process favoured the union.

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